Denver-based RLH Corporation is looking for regional systems to acquire while also reducing the number of brands in its existing portfolio.
LAS VEGAS—Proceeds from RLH Corporation’s previously announced plan to shed the hotels it owns will help the Denver-based company acquire other regional hotel brands.
Greg Mount, RLHC’s CEO and president, said last week during a media question-and-answer session at the company’s annual brand conference that it is seeking other brands to acquire to help further strengthen its conversion-dominated platform.
The company’s sale of its real estate assets—most of which are through joint ventures—will give it between $165 million and $175 million to grow its system, Mount said.
“Acquire more systems out there—that’s what you’re going to see us do,” Mount said. “To continue our trajectory it has to be a combination of organic (growth) and acquisitions.
“We’re really focused on other systems,” he added. “We’ll be focused on midscale and upscale. We won’t make any more acquisitions in the economy scale.”
RLHC isn’t looking to add more brands to add to its portfolio. Mount said the company is already in the process of retiring four brands from its current lineup of 13. He added the company knows precisely what is on its shopping list.
“There are a number of smaller regional systems out there that we’re a good acquirer for them,” Mount said. “We’re not looking to add brands, we’re looking to add scale. If we came across the right upper-upscale brand, we’ll do it.”
The timing for the company’s growth is sooner than later, according to the CEO.
“Our goal is to get the bulk of our JVs … get those dispositions done in the next 12 to 18 months,” Mount said. “Right now, we’re in a good to very good time to sell hotels. I don’t think timing could be any better for us.”
The reason the company doesn’t want to add brands is simple, he added. The proliferation of brands within some brand companies has created a blur that confuses consumers and owners.
“We have strategically and consistently focused on being a good conversion brand system,” Mount said.
There a number of assets in good locations that are either undercapitalized or underbranded that can create an opportunity for an owner to update and improve the offerings in a market without adding supply, Mount said.
“They can bring in capital to reposition it and compete and provide some elasticity in the product without adding new supply,” he said.
RLHC officials have identified three of the four brands they plan to remove from the company’s portfolio by the end of 2018, Mount said. The affected brands include 3 Palms, Lexington and America’s Best Inns & Suites.
The company is actively working with franchisees to expedite the deletion of the four brands, which combined comprise between 60 and 70 properties, Mount said.
“We have provided those franchisees a cost-neutral basis to move to one of the brands that will fit them going forward,” he said. “They have the choice to stay with the current brand through the end of their contract, but at the end of this year we won’t use resources to promote those brands.”
Roger Bloss, president of global development, said the plan is moving forward at a good pace.
“We put together some nice incentives to have them move within the system,” Bloss said. “They’ve got 12 months to do it at their pace.”
Bill Linehan, EVP and chief marketing officer, said there are obvious benefits to reducing RLHC’s brand lineup.
“Aside from the incentives, the biggest benefit is having aligned marketing,” Linehan said. “When they align with one of our brands’ positioning, they benefit from consumer recognition and the other benefits that we have.”
All of this points to RLHC continuing its focus on attracting conversion opportunities, although the executives said they will still accept new-build projects that fit the system. One of the new cornerstones of that conversion program is the company’s relaunched Signature Inn brand.
“You’re going to see Signature create a lot of velocity in that market space,” Mount said, adding that it will be lucrative “to finally have a brand that’s focused on upper economy and lower midscale (segments) that’s embracing exterior-corridor assets in good locations and providing economical way to make them relevant again.”
The brand has created opportunities for deals in major gateway cities, and secondary and tertiary markets, Mount said.
Editor’s note: RLH Corporation covered hotel expenses for two nights at the Hard Rock Hotel & Casino during the conference. Complete editorial control was at the discretion of the Hotel News Now editorial team; RLHC had no influence on the coverage provided.